Securing a Certificate Authorizing Registration

April 5, 1990 BIR RULING NO. 052-90 21 (e) 50 (a) 000-00 052-90 S i r : This refers to your letter dated February 2, 1990, in effect, requesting advise on how to secure the Certificate Authorizing Registration, in view of the new withholding tax requirements on the sale of real property as explained under Revenue Memorandum Circular No. 7-90. cdtech Documents show that under the contract to sell executed on June 30, 1970, Manila Remnant Company, Inc. (vendor) of 6797 Ayala Avenue, Makati, Metro Manila, agreed to sell to Erlita A. Pacioles, (vendee), represented by Angela A. Pacioles, of 1887 Balaguer Street, Sta. Cruz, Manila, for a consideration of P35,752.00 (the balance of P32,176.80 to be paid in ten (10) years at a monthly amortization of P425.40 beginning August, 1970) real property designated as Lot 2, Block 7, of Capitol Homes I Subdivision, located at Capitol District, Quezon City, and covered by a mother Title which is TCT No. 162941; that the installment payment for said lot appears to have been continued by the spouses Mariano and Helen Pacioles; that while full payment was already made on July 21, 1989, the Deed of Absolute Sale was not immediately executed by the parties concerned because of the pendency with the National Capitol Judicial Region, Branch 105, Quezon City, of LRC Case No. Q-603(88), involving reconstitution of the original certificate of title lost by fire in the Registry of Deeds of Quezon City which was decided only on November 3, 1989; that on January 23, 1990, Erlita Pacioles, vendee in the aforesaid contract to sell, executed a transfer of rights in favor of the spouses Mariano and Helen V. Pacioles, and shortly thereafter, on January 30, 1990, the Manila Remnant Company, Inc., executed a Deed of Sale in favor of the abovenamed spouses. It is verbally represented that while the contract to sell was executed in June, 1970 and installment payment of the balance is to last for ten (10) years, full payment was completed only in July 1989 because of the pendency of a civil case between the vendor and a third party affecting the vendor's title to the properties within the subdivision area; thus, payment of the vendee was suspended until the case was finally settled. But notwithstanding full payment of the stipulated price in the contract to sell executed in 1970, the amount of P348,800.00 was reflected in the Deed of Sale executed on January 30, 1990 upon the advise of the Revenue District Office in Quezon City that the consideration should reflect the zonal value prevailing at the time of the execution of the deed of absolute sale. In reply, please be informed that pursuant to Revenue Memorandum Circular No. 7-90 clarifying Revenue Regulations Nos. 12-89 and 1-90 prescribing the withholding of creditable income tax on sale, exchange or transfer of real property, the obligation of the payor to deduct and withhold arises at the time the consideration is paid or payable (par. 4, RMC 7-90). In the case of installment sales, only such amounts paid beginning in January, 1990 shall be subject to withholding in consonance with the rule that regulation shall apply prospectively. Thus, installment payments paid before 1990 shall not be subject to withholding. Accordingly, in the instant case, since the last payment was already paid prior to January, 1990 and the Deed of Sale executed on January 30, 1990 was intended merely to evidence transfer of an already paid up real property, the withholding requirement under Revenue Regulations Nos. 12-89 and 1-90 will not apply. Such being the case, the Revenue District Officer may issue the Certificate of Registration (CAR) without the payment of the creditable withholding tax by the payor. Pursuant to Section 196 of the Tax Code, documentary stamp, tax shall be paid based on the amount appearing in the Deed of Absolute Sale executed on January 30, 1990. Very truly yours, (SGD.) JOSE U. ONG Commissioner